Correlation Between American Funds and Capital Growth
Can any of the company-specific risk be diversified away by investing in both American Funds and Capital Growth at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining American Funds and Capital Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Capital and Capital Growth Fund, you can compare the effects of market volatilities on American Funds and Capital Growth and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in American Funds with a short position of Capital Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Capital Growth.
Diversification Opportunities for American Funds and Capital Growth
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Capital is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Capital and Capital Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Growth and American Funds is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on American Funds Capital are associated (or correlated) with Capital Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Growth has no effect on the direction of American Funds i.e., American Funds and Capital Growth go up and down completely randomly.
Pair Corralation between American Funds and Capital Growth
Assuming the 90 days horizon American Funds is expected to generate 1.19 times less return on investment than Capital Growth. But when comparing it to its historical volatility, American Funds Capital is 1.02 times less risky than Capital Growth. It trades about 0.11 of its potential returns per unit of risk. Capital Growth Fund is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,170 in Capital Growth Fund on September 4, 2024 and sell it today you would earn a total of 302.00 from holding Capital Growth Fund or generate 25.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
American Funds Capital vs. Capital Growth Fund
Performance |
| Timeline |
| American Funds Capital |
| Capital Growth |
American Funds and Capital Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Capital Growth
The main advantage of trading using opposite American Funds and Capital Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Capital Growth can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Capital Growth will offset losses from the drop in Capital Growth's long position.| American Funds vs. Calamos Market Neutral | American Funds vs. Legg Mason Partners | American Funds vs. Transamerica Emerging Markets | American Funds vs. Massmutual Select Diversified |
| Capital Growth vs. Income Fund Income | Capital Growth vs. Usaa Nasdaq 100 | Capital Growth vs. Victory Diversified Stock | Capital Growth vs. Intermediate Term Bond Fund |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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